1. Policy Response to the Crisis: How National Can It Be in CEE? Ivan Lesay Institute of Economic Research, Slovak Academy of Sciences Ministry of Finance of the Slovak Republic Debt, Finance and Economic Crisis: Consequences and Solutions Eurodad-Glopolis International Conference, Prague, June 3, 2013

2. Fiscal Profligacy? Government deficitCurrent AccountFinancial Account GR-5,4PT-9,3PT7,9 PT-4,2GR-8,4GR7,4 IT-2,9ES-5,8ES5,4 FR-2,7IE-1,9IE2,4 DE-2,3IT-1,3IT1 AT-1,6FR0,5FR-0,2 NL-0,6AT1,7AT-0,8 BE-0,3BE3 -2,8 ES0,5DE3,2DE-4,1 IE1,5NL5,5FI-4,4 LU2,3FI6NL-4,6 FI4,2LU10,6LU-11 % of GDP, 2000-2007 avg. 2 Eurostat

3. Living Beyond Our Means? I. 3 DG Ecfin AMECO database

4. Living Beyond Our Means? II. DG Ecfin AMECO database 4

5. European Rescue: Public Funds Saving Private Assets Public intervention makes it easier for private investors to reduce their exposure in the Eurozone peripheries Greece’s current account deficit and its external financing (cum. 2008-2011, US billion) 5 International Monetary Fund

6. European Remedy: Austerity and Structural Reforms (4P Report) I. Michal Polak, MF SR6

7. European Remedy: Austerity and Structural Reforms II. Michal Polak, MF SR7

8. European Remedy: Austerity and Structural Reforms III. Michal Polak, MF SR8

9. European Limits to National Anti-Crisis Responses Eurozone MS – missing central bank tools ◦ no exchange rate cushion ◦ no interest rate policy ◦ no last resort lender ◦ ECB: „we don't have a mandate“ EU: Stability and Growth Pact (Six-Pack, Two-Pack) ◦ Medium Term Objective ◦ Excessive Deficit Procedure EU25: TSCG (Fiscal Compact) ◦ Automatic Correction Mechanism 9

10. CEE Development Models: SK, SI, EE, CZ Type of capital inflows ◦ SK, CZ productive FDI vs. EE, SI ext. credit to non- tradables Current account position ◦ CZ (-); EE (↑ but risk); SK, SI (balanced) Private indebtedness ◦ SK (↓↓); CZ (↓); EE (↑↑ but adjusted); SI (↑) Financial sector condition ◦ CZ, SK (bailed out); EE (foreign); SI (↓) Dominant sectors in economies ◦ SK, CZ (export ind.); EE (services); SI (inbtw.) Public indebtedness: 50 % GDP (EE 10 %) 10

11. Summary and conclusions National anti-crisis responses possible (even desirable) but... ◦ National limits – economic development model path dependence ◦ (Eurozone) EU (monetary) fiscal limits Full-fledged anti-crisis response only if coordinated at the European level ◦ End austerity, admit the systematic nature of the crisis ◦ Ballanced development, productive (green) investment 11

12. THANK YOU FOR YOUR ATTENTION Ivan.Lesay@savba.skIvan.Lesay@savba.sk, Ivan.Lesay@finance.gov.skIvan.Lesay@finance.gov.sk 12